The US Federal Reserve (Fed) has just cut interest rates for the second time this year, with a reduction of 25 percentage points. Economist - Dr. Nguyen Tri Hieu commented that the reason for the Fed's interest rate reduction is that core inflation has decreased to 2.6% and is aiming for 2% this year. Therefore, the Fed is no longer too concerned about inflation.
However, despite the Fed's interest rate cut, the USD Index is still quite high, reaching 104.95 on November 8, meaning the USD is still strong. This comes from the re-election of Donald Trump as US President. The value of the USD is still high, even increasing, leading to the depreciation of the Vietnamese Dong. The current exchange rate of the Vietnamese Dong to the USD is 25,470 VND/USD.
“ When Donald Trump won the election, the financial markets were excited, the value of the USD increased compared to other currencies. Normally, when the Fed cut interest rates, the value of the USD would decrease, but the impact of the information from Mr. Trump kept the USD at a high level.
Therefore, the Fed's interest rate cut this time has not reduced the VND/USD exchange rate much, not causing excitement in the Vietnamese stock market. It can be clearly seen that in the past two days, the Vn-Index has decreased. If the VND/USD exchange rate is still high, imported goods will still be expensive, so it will continue to affect inflation in Vietnam," Mr. Hieu analyzed.
Illustration photo: Government Newspaper.
Meanwhile, Associate Professor Dr. Dinh Trong Thinh commented that the Fed's interest rate cut will mainly bring positive impacts to the Vietnamese economy.
In the context of Donald Trump’s re-election, investors expect the USD to appreciate, the economy to grow and stocks to do well. However, when the Fed lowers interest rates, the USD tends to depreciate, helping to reduce pressure on the VND/USD exchange rate. This will make investments in Vietnam more attractive.
Low interest rates in the US will also prompt investors to seek higher-yielding investment opportunities in emerging markets like Vietnam, where interest rates are likely to remain attractive.
In addition, the Fed's interest rate cut can also help the State Bank of Vietnam (SBV) study reducing interest rates in the liquid market, thereby supporting economic development.
“However, there are also some negative impacts to note, such as Vietnam's exports may be affected by the slowing US economy, reducing demand for Vietnamese goods from the US,” Mr. Thinh analyzed.
However, experts believe that the Fed's 0.25% interest rate cut to a range of 4.5%-4.75% will have a negligible impact on Vietnam's economy because this reduction is not much and the State Bank still has reasonable ways to manage exchange rates to help stabilize foreign currency supply and demand.
Source: https://vtcnews.vn/fed-tiep-tuc-giam-lai-suat-se-tac-dong-the-nao-den-viet-nam-ar906408.html
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